The IRS Claims New Patriot Act Type Powers to Punish Political
Dissenters

by Robert R. Raymond November 28,2003

In a precendent-setting case, the IRS wielded new power to punish the
political speech of those who "espouse views" the government considers
"inconsistent" with government-held beliefs.


SNIP

No. 00-1412

In the Supreme Court of the United States

ROBERT R. RAYMOND AND ROBERT G. BERNHOFT, PETITIONERS

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

BARBARA D. UNDERWOOD
Acting Solicitor General
Counsel of Record
CLAIRE FALLON
Acting Assistant Attorney
General
RICHARD FARBER
THOMAS J. SAWYER
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217

QUESTIONS PRESENTED

1. Whether the district court had subject matter jurisdiction to enjoin
petitioners from promoting and selling a tax-protest program that
contained false and fraudulent statements regarding the federal income
tax system.

2. Whether summary judgment was properly entered in this case when
there were no material facts in dispute.

3. Whether an injunction prohibiting petitioners from selling tax-
protest materials that contained false and fraudulent statements, from
inciting others to violate federal tax laws, and from filing frivolous
Freedom of Information Act (FOIA) requests with the government violated
the First Amendment.

In the Supreme Court of the United States

No. 00-1412

ROBERT R. RAYMOND AND ROBERT G. BERNHOFT, PETITIONERS

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

SNIP

1. During 1996, petitioners advertised and sold a tax-protest plan
called "De-Taxing America." The plan contained materials
promoting "general tax-protest principles" and set forth the view that
the federal income tax is unconstitutional. Pet. App. 2. The materials
included forms that guided purchasers through the "de-taxing" process.
These forms led purchasers to believe that they no longer had to pay
income or social security taxes and that they were entitled to receive
refunds of all income taxes paid during the previous three years. Id.
at 2-3.

After petitioners refused to cooperate with an investigation by the
Internal Revenue Service into the "De-Taxing America" program, the
Service requested the Department of Justice to file a suit to enjoin
petitioners' actions. Pet. App. 4. Section 7408 of the Internal Revenue
Code, 26 U.S.C. 7408, authorizes the Secretary of the Treasury
to "request" the Attorney General to seek injunctive relief against the
promoters of abusive tax shelters. The Code defines "abusive tax
shelters" to include a "plan or arrangement" that makes false or
fraudulent statements regarding tax deductions, credits or exclusions
from income. 26 U.S.C. 6700(a)(1)(A)(iii). The request to the
Department of Justice was made in a letter signed by an Assistant
District Counsel of the Internal Revenue Service located in Milwaukee,
Wisconsin. It was reviewed and approved by the National Office of the
Chief Counsel located in Washington, D.C. Pet. App. 74. After receiving
that request, the United States filed suit against petitioners to
obtain a permanent injunction against their continued promotion of
the "De-Taxing America" scheme.

2. a. Petitioners filed two motions to dismiss the proceeding for lack
of subject matter jurisdiction, both of which were denied by the
district court. In response to the first motion, the government
submitted (i) a redacted copy of the letter from the Assistant District
Counsel to the Department of Justice requesting that the suit be filed,
(ii) the declaration of the Assistant District Counsel verifying that
he was a proper delegate of the Secretary for the purpose of submitting
such a request and (iii) the declarations of two officials of the
Department of Justice that explained that they had authorized the
filing of the suit on behalf of the Attorney General. Pet. App. 8.

The government thereafter filed a motion for summary judgment.
Petitioners opposed the motion, claiming that the district court lacked
subject matter jurisdiction over the suit. Petitioners also denied that
the tax-protest principles promoted in "De-Taxing America" were false.
They stated that the program contained statements "which [they]
believed, and still believe, to be true." Pet. App. 89. Finally,
petitioners submitted declarations stating that they had stopped
selling the "De-Taxing America" program and had no intention of selling
that program in the future.

b. The district court concluded that the "De-Taxing America" program
contained false statements and false advice concerning the federal
income tax and therefore granted the government's motion for summary
judgment. The court entered an injunction that bars petitioners from
(i) selling and marketing the "De-Taxing America" program, (ii)
inciting others to violate the tax laws and (iii) filing frivolous
Freedom of Information Act requests with the Internal Revenue Service
(IRS). Pet. App. 21-22. The court held that the suit had properly been
requested by a delegate of the Secretary, for "[t]he Declaration of
Edward G. Langer establishes that the Chief Counsel of the IRS (through
his delegate, Assistant Counsel Attorney Langer) authorized and
requested the Attorney General" to file the suit. Id. at 74.

3. The court of appeals affirmed. Pet. App. 1-23. The court agreed with
the district court that the declaration of the Assistant District
counsel and the agency's letter requesting the suit established that
this action had been properly authorized by the Secretary. Id. at 8.
The court noted that petitioners "had ample opportunity to produce
evidence that contradicts this declaration and have not done so." Ibid.

The court further concluded that the jurisdiction of the district court
was not, in any event, dependent on the procedures established in
Section 7408(a), which specifies that a suit for an injunction may be
prosecuted "at the request of the Secretary." 26 U.S.C. 7408(a). The
court held that jurisdiction for this suit exists under Section 7402 of
the Code, which authorizes the district courts "to make and issue in
civil actions, writs and orders of injunction, * * * and such other
orders and processes, and to render such judgements and decrees as may
be necessary or appropriate for the enforcement of the internal revenue
laws." 26 U.S.C. 7402(a).

The court of appeals also rejected petitioners' contention that there
were disputed facts that precluded the entry of summary judgment. The
court noted (i) that the statements made by petitioners "are clearly
false representations concerning the government's authority to tax its
citizens" and (ii) that the undisputed evidence reflects that
petitioners "reasonably should have known [that these statements] were
false." Pet. App. 14, 15.

The court rejected petitioners' assertion that the injunction entered
in this case violates their First Amendment rights. Construing the
injunction "to prohibit only false, deceptive or misleading commercial
speech that is related to the provision of tax advice," and noting
that "[i]t is permissible for the government to prevent the
dissemination of false or misleading commercial speech," the court held
that the injunction should be sustained because it is "narrowly
tailored to prohibit only those activities that can be restrained
consistent with the First Amendment." Pet. App. 21, 22, 23.